The deputy governor of the Eastern Caribbean Central Bank (ECCB) has painted a grim picture for the region if international banks continue the trend of de-risking.
Trevor Brathwaite said the measure will have multi-sectoral impact on regional economies, which could mean a stop to economic activity.
“If you want to take it to the extreme, you and I will not be able to shop in a supermarket because the supermarket will not be importing the stuff we like to buy,” he said. “You and I will not even be able to buy shoes and clothes … cars, tyres and parts.”
De-risking is the process of international banks terminating relationships with correspondent banks to avoid tedious “risk based procedures” that have been imposed by the Financial Action Task Force on Money Laundering to limit financial crimes.
Regional banking institutions rely on such relationships in order to allow residents to conduct international financial transactions.
He explained that local banks will not be able to process purchase transactions and merchants will not send goods without the assurance of payment.
“We are importing nations, so most of everything that we use, we import. For you to import you must have the ability to pay for those imports. Even if you had a lot of EC dollars to pay for your transaction, then without a correspondent banking relationship, that’s where it stops,” the ECCB official said.
He added that while such an occurrence may boost the consumption of local goods, there may be internal issues with producers being able to keep up with supply.
(More in the Daily Observer)